Central American hurricanes push up Arabica prices

Published on : 20/11/2020 – 00:20

Hurricanes follow one another in Central America. The last, Iota, dislodged hundreds of thousands of people in the countries of the American isthmus. In Honduras, the region’s leading exporter, damage to coffee plantations is worsening, pushing up arabica prices.

An assessment of the damage caused by Hurricane Iota to Honduran coffee plantations this week has yet to be completed. We will have to wait until next week. And we will not know the results of this inspection until the end of November or early December.

Already 90,000 bags lost with the first hurricane

But the damage will accumulate after a first hurricane, And, two weeks ago, which had already caused the loss of 90,000 bags of beans according to the Honduran Coffee Institute.

Honduras is the region’s leading exporter and the world’s fourth largest exporter, with around 6 million bags shipped per year. But Guatemala, world number 6, is also affected, as well as Nicaragua. Harvesting, drying and shipping can be very difficult.

Prices have recovered 30% since the low in June

Hence the concern that manifests itself on the New York Stock Exchange where this variety is listed. The Arabica pound topped $ 1 24, its highest level in two months. This is an acceleration of the uptrend that we have already observed since the low in June, when the Arabica had fallen below a dollar a pound, because of the closure, linked to Covid-19, cafes and restaurants. Since then, arabica has regained 30%.

Hurricanes, rust, Niña: the hazards on the supply are increasing

Because the threats to arabica production are increasing. Central America is hit by hurricanes but also by an upsurge in rust, a disease of coffee, which developed when prices were very low, coffee farmers had less income to maintain the trees. Finally, drought is raging again in the coffee plantations of Brazil, this time a consequence of the return of La Niña. The flowers of the coffee trees wither prematurely, which does not bode well for the next harvest.

Rebound in demand in the second half of 2021?

Brazil is the world’s leading producer and exporter of coffee, and particularly plain arabica, a lower quality than Central American arabica, but which weighs very heavily in volume. However, according to Goldman Sachs, global coffee demand should pick up again in the second half of 2021, with the expected reopening of hotels, cafes and restaurants around the world.

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